Episode #4: Financial Junk Food

Today’s Prep:

Explore the correlation between different unhealthy foods and the financial world. Remember, too much junk food is bad for you.

(Click the featured times below to jump forward in the episode)

Equipping Points:

[1:24] – Financial Junk Food: Empty Calories. 

  • Empty calories are foods with absolutely no nutritional value. Think about things like soda and candy. Boy, do they taste good, but they do absolutely nothing for your health. In the financial world, empty calories look like extra items in your portfolio that don’t really add any value. Many firms try to get you to commit to these extravagant financial plans. They come in large binders full of charts and graphs. However, most of the data is nothing but fluff. Conversely, what folks really want is an answer to the bottom line: “Will I have enough money to retire, and will it last me until the end?” We can provide those answers within a couple of pages of information, and those answers contain a lot more “nutritional value” than shiny prospectus guides and boilerplate filler.

[3:31] – Financial Junk Food: Added Sugar. 

  • Back in the day, everyone wanted to take fat out of their diet. Folks believed it caused problems with obesity, so companies began replacing fat with sugar. It’s since been discovered that sugar is the real culprit, and it’s incredibly difficult to remove sugar from your diet. Sugar is in everything. You can even find it in your tomato sauce, proving sometimes it’s hidden in items you wouldn’t expect to contain sugar. Fees are the added sugar of the financial world. There are going to be fees in almost any financial product you purchase because that’s how financial companies make money. Life insurance products, annuities, mutual funds, and even CDs at the bank all contain fees. When you buy a financial product, know what fees are contained within it. Look for low-cost products that will make for a healthy portfolio.

[6:51] – Financial Junk Food: Trans Fats.

  • Let’s be real. Trans Fats are amazing. Cakes, pies, and donuts are all incredible foods. Of course, we know they’re absolutely horrible for you. Donuts are essentially deep fried bread covered in sugar. But man do they taste good. The problem of course is that you can’t just eat one donut. You have one, and suddenly, you’re halfway through the box.

  • Trans fats are almost addictive, and in the investment world, the parallel to that is risk. We know risk can be bad, and we know we’re supposed to get out of the market when it’s high. However, risk is addictive, especially as markets are rising. When the markets are high, we get greedy. We just can’t seem to take some money off of the proverbial roulette table. Even though those returns are appealing, you simply must take risk out of your portfolio as you plan to retire. Otherwise, as the market takes a dip, your portfolio could face serious consequences.

Today’s Takeaway:

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